All Forum Posts by: Christian Podedworny

I am looking to build a 5-15 unit multifamily complex using shipping containers which are fully built from China.

After having read dozens of articles about building multifamily using shipping containers I am convinced this can work. Throughout the world Japan , Germany, Canada , South Africa,China and several other countries use  shipping containers for constructuon projects. This method is used because it offers reduced costs in building, reduces the time of construction 30-40% , is stackable, fireproof, and safe . This building method is common throughout the world which sparked my interest .. Japan is the world leader in prefab contruction  where 15% of all new construction projects are made using prefab  construction methods.

The project I am seeking to develop would include buying two 40 ft extra high shipping containers From China and have them shipped to Tampa Florida. . 

 The process would include: having a Chinese factory build the shipping containers in the Guangdong Provice (largest manufacturing area/ construction factories in China) ,shipping them to Tampa,setting them on a concrete slab, cutting out the center walls, welding/ connecting the container, and finishing the center part with tiles.

. Prior to doing this I would have to connect the sewer,water electric , have the blue prints , permits and other other aspects of the construction in place . 

The largest monetary savings would be buying this containers prefabbed from China and this would significantly reduce all construction costs. The average build costs in Tampa are 110 sq ft however this can be done for under $55 sq ft

After analyzing the construction costs in building  a 640 sq ft apartment using two 40 ft containers my calculations totaled $24,000/unit  (this price includes the shipping costs from port to construction site).

This 640 sq ft unit would be built to Tampa housing codes which would not impact the approval of the unit.  When calculating the cost per buildable  square foot the costs are : 

$37.50 /sq. Ft however this does not include the roof. 

After looking over all costs in this development I came up with the number of $45,000 per unit which includes land, permits , parking lot, roof,GC costs , Architectural costs etc.

This unit would be a small 2 bedroom 1 bath and it would be rented to a section 8 tenant for $945 where the tenant would pay for water & electric.

When calculating the return on investment I came up with a an ROI of 15%

$45,000 total build cost /unit 

Gross yearly rent ($945 x 12 = $11,340)

-40 % expense 

Income $6,804

6,804/ 45,000. = 15.1% ROI

These are not accurate calculations but I believe they are close based upon my research. 

Ozzy, I have not found a multifamily property to purchase at this time but the Freddie Mac small apartment loan would be my first choice. These are the key notes I wrote down when I spoke to Doug at Crefcoa

- 25% down is more likely with a new borrower that is non local and does not have any multifamily experience.

-Older properties 1970's (C class) ,may not qualify for 20% down more so 25% down

- You need to have 6 to 9 months of liquidity of the principal and interest at closing to show you have money in your account at closing. This  makes the banks confident and provides them with less risk. 

- they want to see you know how to operate a multifamily property but if you do not have the experience you can hire a property management company which can fill that requirement

I believe I would need a guarantor for the loan but I'm not sure if I can go around this if the loan will be recourse.

Any thoughts ?

This property is in Tampa,a 15 % cap in Long Island would be a miracle. After I reposition the property I will address all issues/repairs. 

I am analyzing using higher leverage to acquire more properties and want to put only 15% down. Since I can acquire off market deals with 15-17% cap rates I have no problem paying a premium for high interest rate with a smaller down payment. The goal is to attain as much real estate with the lease amount of capital as possible

. The interest on a 30 year fixed mortgage on a quadplex is about 4.75 % but I am looking to get a 30 year fixed loan at 7% with 15% down. 

Many people will shy away from a 7% interest rate knowing they can get 4.75% with a higher down payment. Now the higher down payment takes away the ability for me to acquire more properties therefore I can pay the higher rate and maximize leverage. Most investors will buy a property with an 8-9% and put 25% down but if you can attain a 15-16 % cap why not pay a higher interest rate and leverage the capital as much as possible? 

Quadplex 

$215,000

Rent roll $3200

Expenses $700

-----------

Costs of repositioning property $25,000

Potential rent roll $4,600

Expenses: $700

After repositioning the property I can attain a  16-17% cap rate 

Would you leverage $35,000 to buy this property and pay 7% interest knowing your Invesment will yield a 16 % cap?

I have to say yes considering the numbers but is here something I am missing ?

Hi Jaysen,

    I did look at those options but I want to conserve my assets to apply to a much bigger deal. Since the owner is motivated and can provide with me with adequate terms I would like to take advantage of the opportunity. I do not have experience in multifamily and this deal with be my first step in getting the experience I need to propel me to the larger complexes.

My take is the interest rates are still incredibly low and I want to leverage as much as possible because all of my properties provide over 20% ROI. I am confident in the healthy cash flow and I am up to taking on more debt to attain as many units as I can. Many people would frown upon the debt approach but I do not have debt so there is minimal risk

At this time I will be acquiring more real estate and I am trying to find a lender who is investor friendly and who can work with me on my future acquisitions. As an out of state investor I am having a hard time finding a lender who would accept \ owner owner financed deals and deals with 15 % down.

After measuring the interior square footage with my contractor we found there is enough room to have 3 bedrooms 

(10 x10 ), (10X 10) (10 x9). The bedrooms would be small but I would not mind because I can find a small family to rent this unit (less than 5 people). 

Do I have to file with the local building department so show plans, architectural drawing etc. or can I move forward and do it without? 

I understand there might be issues when renting the unit to tenants who know the laws and might make my life difficult if I rent a 2 bedroom unit as a 3 bedroom unit without the proper filing and plans.

What are you thoughts? 

I made a post about purchasing 2 quadplexes earlier with an owner financed down payment in second position and I have the same situation on a 20 unit complex. The seller is going to entertain owner financing (on down payment portion) on this 20 unit he looks to sell and I am trying to figure out a way on how to purchase this property with 10% down. I own a quadplex, 3 duplexes and 3 SFR which are all paid off. I can refinance the Quadplex, pull out $100,000 as a 10% down payment on the 20 unit complex and possibly have the owner fiance 10- 15 % of the renaming down payment. Even though I can refinance all the properties and come up with the 25% down payment from the equity in the properties I rather save the equity to buy other properties. What are your thoughts? Are there lenders who would underwrite this deal?

 I am in the process of negotiating the sale of 2 potential properties with a seller. He has two quadplexes that are adjacent to my Quadplex in Tampa which he looks to sell for $200,000 each ($50,000 per unit). The total price would be $400,000 (8 units)  after the negotiation. 

He told me he is willing to hold 10 % of the down payment as the owner finance portion for maybe 3-4 years and then there would be a balloon at the exit. This is how I seek to structure the financing :

Purchase price : $400,000    

Down payment: 15%   $60,000

Owner finance (2nd position) :            $40,000

 The issue I face is the banks are reluctant to structure a deal this way and they say I need 25% of the down payment which I do not have. I understand there are other angles to pull with owner financing but the seller is fixated on getting the deal done this way. 

  I was told there are portfolio lenders and community banks which would underwrite this type of loan but I live in New York and I do not have any connections with local lenders.